As the ride gets tough, buyers are looking at too many things. While the focus remains on lowering costs, it does not mean that technology investments are going to dry up. Just that all new investments will be under the scanner and enterprises will have to strike the right balance between low costs and technology transformations.
TPI index for Q42011 revealed that the third quarter was interesting for the outsourcing industry. Amidst growing uncertainties and a bleak macroeconomic picture, the industry hasn't lost its momentum. New deals poured in, contracts were renewed, though sizes have gone down. The overall contract value for the IT outsourcing market has gone up. All these indicated that 2011,on the whole, definitely ended on a positive note. Looking ahead at things, the KPMG 4Q11 Survey reveals a futuristic view of how new trends are shaping up in the industry.
Technology or Low costs
The survey establishes the opinion that rising uncertainties, grim economic outlook will have a visible impact in 2012. In fact these changes had started becoming visible last year and most of these will strengthen in the near future. Technology transformations are going to play a major role for businesses in this tough scenario. Amit Singh, partner, Avasant said in a previous interaction, “Technology transformations will be a major trend to watch out for in 2012.” Analytics, cloud, social media will see more interest and investments are more likely to pour in in these areas. These may involve some investment in the initial phases, but experts say that it will be paid off in the form of long term process efficiencies. That is exactly what enterprises are looking for today-efficiency. So, buyers will continue to make IT investments, but every investment will be looked at more closely and in terms of the ROI. Cloud-based transformations will become more prominent and service providers will have to offer an environment that is compatible with the cloud. Atul Vashist, Chairman & CEO, Neo Group, wrote in our Outlook 2012 issue,”Outsourcing vendors will revamp the architecture of their product offerings to fit the modular needs of a cloud environment.”
In the current scenario, is the buyer demand likely to go up? Only 45 percent of the providers expect the demand for BPO and ITO services to go up in the next few months, which is around 15 percent lesser than the previous quarter.
As for what tops buyers' priority list in 2012, it will be cost savings. But they will also look at striking the right balance. The survey states that 69 percent of advisors and 79 percent of service providers believe that the top buyer initiative this year will be to lower costs, and this was closely followed by technology investments.
Nearshore or Offshore
The results show that both offshore and nearshore outsourcing are going to get impacted by the turbulent economic environment. But the demand is expected to be very much there. Advisors pointed out nearshore captive shared service to see the highest demand, whereas service providers believes offshore outsourcing to be more prominent.